GENEVA, May 23: India must carry out further reforms in agriculture, and open up country's maritime transport and energy sector to competition if it is to sustain its “impressive” economic growth, the World Trade Organisation said on Wednesday.
Continued structural reforms would also help create productive employment for new entrants to the labour force, helping India reap a “demographic dividend,” with one third of its population currently aged below 18, a WTO report said.
The WTO said in its Trade Policy Review on the South Asian country that India's economy is expected to grow over nine per cent in 2006-07, building on “impressive” growth averaging over seven per cent between 2001-02 and the present day.
Growth has largely been driven by unilateral trade and structural reforms, with the services sector playing a prominent role. Manufacturing has also performed well, despite some infrastructure constraints.
By contrast, “agriculture growth continues to be slow and erratic... causing considerable distress, especially among small and marginal farmers,” the WTO warned.
The agriculture sector employs around 60 per cent of the working population, but is bedevilled by low productivity, at only around one sixth of its level in the rest of the economy, according to the review.
Meanwhile, public investment in agricultural infrastructure and research has been inadequate due to excessive spending on direct and indirect subsidies to farmers, the WTO noted.
Infrastructure remains a “major bottleneck” across all of India's economy, the trade policy review said.
While competition has been increased in telecoms and some transport sectors, maritime transport and port services continue to suffer from inefficiencies.
This constitutes “a major impediment to trade,” the WTO said.
The energy sector also needs reform, as there are frequent shortages of supply, and little progress seems to have been made in tackling the losses of state electricity boards, it said.
India's tax-to-GDP ratio is relatively low and “seemingly insufficient to meet its developmental needs,” the review noted.
This is compounded by a “disappointing” level of foreign direct investment (FDI) at around just one per cent of GDP, with high real rates of interest acting as a deterrent.—AFP
